Breaking free of Wall Street and the boom-bust cycle

Friday

Nov 30, 2012 at 12:01 AMNov 30, 2012 at 3:00 PM

By Mike Krauss

The Bucks County Commissioners have unveiled a preliminary budget for 2013, and like county, city and state elected officials across the nation, they are looking at a deficit. In this case, $2.7 million.

The cause of the deficits is largely the same everywhere: in the wake of the man-made catastrophe of the collapse and bailout of Wall Street, the economy remains in recession, unemployment high and tax revenues decreased, combined with cutbacks in state and federal funding.

State funding has been cut back because of the same declining revenues, no relief in sight. And with Washington focused on what many consider a propaganda-induced crisis — the “fiscal cliff” — there will be no relief there.

The options touted to close the gap are about the same in Bucks County as across the nation: raise taxes, reduce services (when unemployment and foreclosures increase the demand for those vital services), lay off employees and add to unemployment or borrow, adding yet more debt to already burdened taxpayers.

Those are the only tools state and local governments have, tools to share the pain. Or are they?

While Americans view the economic contraction and recession as global, it isn’t. It is highly localized to the economies of the United States and Europe, which are most closely tied to the central bank cartel of Wall Street and Federal Reserve private banking system. But in many other nations, where on the average 40 percent of the market is in public banks, economies are growing.

These are the so called BRIC nations (Brazil, Russia, India and China), as well as Australia, New Zealand, Canada, Iceland, South Africa and Japan; and the healthiest economy in Europe, Germany, where public banks have existed for decades and provided much of the credit and investment for West Germany’s recovery from World War II. The public “Post Office Bank” in Japan played the same role there.

This is not to say that these nations have not felt the impact of declining exports to the sick economies of the U.S. and Europe. They have. But no one in China, or Brazil or India is talking austerity.

Just the failed central bankers and the 1 percent in the U.S. and Europe who caused the catastrophe.

But there are cracks in the wall. Iceland told the predatory bankers to get lost, prosecuted, went after the money they stole and now its economy is recovering while the U.S. and Europe languish. Members of the English Parliament are considering real limits on the private banks.

And last week in Scotland, the finance minister, members of Parliament and civil servants heard from advocates of a public bank as they consider legislation to create a public bank on a national scale.

But public banks are unknown in the U.S., except for one state, North Dakota, where the Bank of North Dakota (BND) has played a major role in sustaining the strongest economy and banking industry in the nation: lowest unemployment, rising wages, continued budget surpluses and no bank failures.

In addition to a current loan portfolio of $2.9 billion invested throughout the state’s economy (businesses, mortgages, student loans), the BND invests in municipal infrastructure, supports disaster relief and has returned an annual average profit of $30 million a year over 10 years to the state’s general fund — revenue without taxes.

The BND is also partnering in North Dakota’s strong energy and agriculture sectors — for example, helping to finance the first new refinery in the United States in decades — multiplying those sectors’ contributions to the economy.

So what about Pennsylvania, which has energy and agriculture and a whole lot more, in a far more diversified economy than North Dakota? The impacts of a state public bank in Pennsylvania could well exceed those of North Dakota. And a public bank of Bucks County could help diversify its economy and end its decades long dependence on residential real estate taxes and state and federal handouts.

Small wonder that now 20 states and a growing number of municipalities across the country. are exploring how public banking can grow their economies, create jobs, boost tax revenues in an expanding economy, halt cuts to vital services, end layoffs and reduce taxpayer debt.

Of course, the benefits of any new public bank will not be felt immediately. The best studies to date (by the Center for State Innovation) project a three to five year period until public bank profits begin to flow, depending on how the bank is capitalized. But the creation of affordable credit to invest in the local economy can begin almost immediately.

The Commonwealth of Pennsylvania and counties like Bucks have more than sufficient assets and access to capital to form a public bank. This innovation deserves the attention of our elected officials.

Because one thing is certain. As long as the creation and cost of credit is controlled by Wall Street and the Fed, recessions will come and go and come again. The time to begin breaking free of that cycle is now, so we don’t get stuck again in a few years with the same bad choices.

Mike Krauss, formerly of Levittown, is a former officer of Bucks County and Pennsylvania government and chair of the Pennsylvania Project. www.papublicbankproject.org Email: mike@mikekrausscomments.com

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